Pay Yourself First

Our regular readers know we have a goal of reading 52 books in 52 weeks. The idea behind the goal is to identify ideas and implement them, or build upon them, in our Solid Planning approach to achieving our 2009 goals.

One item that clearly stands out in the books we have read so far is "pay yourself first".

This tip is huge if it is used properly in your planning process. If you have ever wondered what this really means please read on.....

Our approach to "pay yourself first" is to set up a separate savings account, we recommend ING Direct because the account can be linked to your existing accounts and the interest rate paid on the account is very attractive.

This separate account should have rules assigned to it such as "not to be touched in case of an emergency". Another rule we suggest is to "establish a target balance". The target balance allows us to set a definite end, or goal, that we can measure against and plan to achieve.

Now that the account is set up the pay yourself first approach can be implemented. You should determine an amount you can regularly pay to reach the target balance. This amount is a commitment, and you should carefully decide the figure you can realistically afford to pay every month. This payment should be treated just like a bill, a very important bill. Think of it like this, the payment of this bill impacts your future and it should receive respect as such. Due to the importance of this bill it should be the the first bill you pay each and every month.

If you use electronic banking or can set up automatic transfers we recommend you use one of these features. If you pay your bills by writing checks then you may need to create an invoice as a reminder.

It's that simple, you can now pay yourself first and you will have the security of knowing that you have an account as a safety net for emergencies.